The Velvet Underground have lost their copyright claim over the banana on the front cover of their debut album The Velvet Underground & Nico.

Manhattan district judge Alison Nathan dismissed the claim without prejudice against The Andy Warhol Foundation, which had been accused of illegally licensing the iconic image for use on other products, court papers show.

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The band, originally formed by Lou Reed and John Cale, had argued that the banana image "became a symbol, truly an icon, of The Velvet Underground".

Court papers filed in Manhattan claimed that the Foundation had tried to trick the public into believing that products, including "a new series of iPhone and iPad cases, sleeves and bags from Incase" bearing the banana had the approval of the band.

The judge said that the Foundation's agreement not to sue the band in turn for their own use of the image meant that there was no copyright dispute requiring resolution.

"The Warhol Foundation has covenanted not to sue VU for copyright infringement for VU's use of the Banana Design," the district judge said.

"This court concludes that the covenant not to sue [by the Foundation] eliminated any justiciable controversy between the parties over copyright in the Banana Design, VU's claim for declaratory judgment is dismissed without prejudice."

The Velvet Underground's lawyer Clifford James said that the band disagreed with the ruling and added that the group is confident that it can win a trademark claim, protecting the image for commercial use.

Original vinyl copies of The Velvet Underground & Nico featured the phrase "peel slowly and see" and a peelable banana which displayed its pink flesh underneath.

The peel-off banana was also incorporated into the band's comprehensive 1995 box-set Peel Slowly and See, while some later reissues have also featured such a sticker.

The Velvet Underground & Nico is reissued in a six-disc Super Deluxe Edition on October 30, featuring stereo and mono versions, unreleased rehearsal recordings, early studio sessions, live tracks and Nico's Chelsea Girl album - complete with peelable banana.